National Union of Workers v Pacific Dunlop Tyres Pty Ltd

[1992] FCA 609

Re: THE NATIONAL UNION OF WORKERS; ELIAS KOPTY and GEORGE THEODORELOS
And: PACIFIC DUNLOP TYRES PTY LTD and GOODYEAR TYRES PTY LTD (trading as South
Pacific Tyres)
No. V I25 of 1992
FED No. 609
Industrial Law
(1992) 37 FCR 419

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
INDUSTRIAL DIVISION
Heerey J.(1)

CATCHWORDS

Industrial Law - termination of employment - breach of award - damages - Industrial Relations Commission proceedings - estoppel - abuse of process - whether proceedings in Commission private arbitration - private and industrial arbitration distinguished - functions exercised by Deputy President - whether agreement as to private arbitration - whether estoppel arises out of industrial arbitration.

Words and Phrases - "arbitration"

Industrial Relations Act 1988

Rubber Plastic and Cablemaking Industry Award 1983

Australian Boot Trade Employees' Federation v Whybrow and Co (1910) 11 CLR 311

Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Doe d Morris v Rosser (1802) 3 East 115, 102 ER 501

Joint Committee of River Ribble v Croston Urban District Council (1897) 1 QB 251

The Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353

The Boilermakers' Case (Attorney-General (Cth) v The Queen) (1957) 95 CLR 529

Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150

Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434

HEARING

MELBOURNE

#DATE 19:8:1992

Counsel for the applicants
(respondents to the notice
of motion): Mr M Bromberg

Solicitors for the applicants: Maurice Blackburn and Co

Counsel for the respondents
(applicants in the notice of
motion): Mr G M Giudice

ORDER

IT IS ORDERED THAT:

1. The respondents' motion by notice dated 10 August 1992 is dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

JUDGE1

The first applicant The National Union of Workers (the Union), the second applicant Elias Kopty (Mr Kopty) and the third applicant George Theodorelos (Mr Theodorelos) have brought an application in this Court against the respondents Pacific Dunlop Tyres Pty Ltd and Goodyear Tyres Pty Ltd, a partnership trading as South Pacific Tyres. I shall refer to them collectively as "the employer". The applicants seek penalties for breach of an award and also damages. The claims arise out of the termination by the employer of the employment of Mr Kopty and Mr Theodorelos.

1. The employer has brought a motion seeking an order that the application be dismissed or stayed on the grounds that the applicants are estopped from making the allegations which found their case and that their proceedings are an abuse of process. That motion is based on proceedings which the Union took in the Industrial Relations Commission (the Commission) concerning the terminations.
   Termination of Employment

2. Mr Kopty and Mr Theodorelos were members of the Federated Rubber and Allied Workers' Union, a predecessor of the Union. They were employed by the employer at its Somerton plant in Victoria. The Rubber Plastic and Cablemaking Industry Award 1983 (the Award) applied to the Somerton plant and the employer and the Union were parties to the Award.

3. On 22 October 1987 the FRAWU and the employer entered into a second tier agreement in accordance with the Conciliation and Arbitration Commission's National Wage decision of 19 March 1987. The agreement was referred to as "the 309 day agreement." Amongst other things it provided for the implementation of 12 hour shifts on a 309 day roster. The agreement contained the following clause ("the employment guarantee"):
   

"Employment Guarantee

The company agrees on the implementation of the 309 day roster to guarantee employment to the workforce for a period of 5 years."

1. The 309 day roster was in fact implemented at the Somerton plant on 5 February 1990.

2. In the latter half of November 1990 some discussions took place between the employer and officers of the Union concerning proposed redundancies in the employer's Victorian plants. On 30 November the employer wrote to Mr Kopty and Mr Theodorelos advising them that as a result of an economic downturn the employer had to retrench a number of people and that their employment was terminated at the end of their shifts on that day. Two other employees were dismissed at the Somerton plant and 95 employees at another plant of the employer at Thomastown in Victoria.
   Commission Proceedings

3. On 5 December 1990 the Union lodged a notification of dispute with the Commission under s.99 of the Industrial Relations Act 1988 ("the Act") which notified the Commission of the existence of an alleged industrial dispute between the Union and the employer
   

"concerning:

1. job security

2. redundancy

3. alleged breach of an agreement

4. terms and conditions of employment."

1. On 7 December the notification was listed for hearing before Munro J, a Deputy President of the Commission, at Melbourne. Mr Paul Richardson, a National Industrial Officer of the Union, appeared with Mr J Polizzi, one of the Union's delegates to the Somerton plant, on behalf of the Union. Present on behalf of the employer were Mr G Watson, a member of the firm of Freehill Hollingdale and Page, together with Mr Grant Claughton, the employer's Corporate Personnel and Industrial Relations Manager.

2. Mr Richardson submitted to the Commission that the employment guarantee in the 309 day agreement meant that no employee would be dismissed for a period of five years from 5 February 1990 and that the dismissal of Mr Kopty, Mr Theodorelos and two other employees at the Somerton plant was a breach of that term and also a breach of cl.47(a) of the Award. That clause prohibits terminations of employment which are harsh, unjust or unreasonable. Mr Watson submitted that the dismissal was not in breach of the employment guarantee or the Award. At the conclusion of submissions Munro J adjourned into conference at the request of Mr Richardson. At the conclusion of the conference, his Honour said that if the redundancies were not accepted by the Union there were review processes available to it and an opportunity for the meaning of the employment guarantee to be argued. His Honour said that the Union should consider what mechanism was appropriate to deal with the issues and that the parties should consider their positions. He said that if the meaning of the employment guarantee could not be resolved by the parties and the dispute proceeded to arbitration, the meaning could be argued in the context of the dispute notification before the Commission. The conference was then adjourned.

3. Mr Kopty and Mr Theodorelos were present at the hearing and the conference on 7 December but as far as the evidence discloses did not take any active part. Mr Richardson did not announce an appearance on their behalf but only on behalf of the Union.

4. There followed discussions between the Union and the employer about the redundancies. Finally at a meeting on 18 March 1991 Mr Claughton informed the Union representatives that Mr Kopty, Mr Theodorelos and the other two Somerton employees would not be reinstated. Mr Claughton said that he did not believe that Munro J would reinstate them. It is alleged by Mr Richardson in an affidavit sworn in these proceedings that Mr Claughton also said that he had spoken to Munro J about the matter and that even if the Union did achieve a favourable decision, which he doubted, he (Claughton) would "pull jurisdiction". Mr Claughton denies saying this and denies that he ever spoke to Munro J privately.

5. However I think it is clear enough that it was present to the minds of both the Union and employer representatives that there might be doubt about the Commission's jurisdiction to deal with the terminations because of the absence of any interstate element in the dispute.

6. The matter was relisted before Munro J on 21 March 1991. Shortly before commencement of the proceedings on that day there was a discussion between the employer's representatives and Mr Richardson in which Mr Richardson asked Mr Watson whether any jurisdictional problems would be raised by the employer before the Commission. Mr Watson said that the employer would not argue that Munro J did not have jurisdiction. When the proceedings commenced Mr Richardson told Munro J that there had been discussions since the last hearing about the question of redundancies and the terms and conditions upon which redundancies would occur. He said that the Union did not wish to progress that element of the dispute but did wish to pursue the question of the termination of the employment of the four employees at Somerton and was seeking from the Commission "a determination as to whether that termination of employment was, as the Union submits, unfair, unjust and unreasonable". Mr Richardson said that the Union would be seeking as part of those proceedings a determination as to the appropriate interpretation of the 309 day agreement and specifically the employment guarantee. After some further discussion, Munro J asked Mr Richardson:
   

"Is there some agreement between you and the employer as to my having jurisdiction in this matter?"

Mr Richardson replied:

"Your Honour, Mr Watson may wish to address your Honour on that. I understand that the question of jurisdiction may not be a threshold issue. I do not wish to speak for the company on that."

Mr Watson said:

"On the question of jurisdiction, it is not our intention to raise arguments to the effect that the Commission does not have jurisdiction in respect of these matters."

1. The parties were not ready to proceed immediately and the matter was adjourned to 25 March. On that day oral evidence was heard and exhibits tendered. Proceedings were recorded by the Commonwealth Reporting Service. The transcript is headed as follows:
   

"AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

MR JUSTICE MUNRO

C No 33237 of 1990

NATIONAL UNION OF STOREWORKERS,

PACKERS, RUBBER AND ALLIED WORKERS

and

SOUTH PACIFIC TYRES

Notification pursuant to section 99 of the Act of an industrial dispute re job security etcetera"

1. The transcript indicates that proceedings commenced at 11.35pm and were adjourned indefinitely at 4.19pm when Munro J reserved his decision.

2. On 13 May in Sydney, his Honour handed down a written decision. The decision is headed as follows:
   

"AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1988 s.99 notification of industrial dispute The National Union of Storeworkers, Packers, Rubber and Allied Workers

and

South Pacific Tyres

(C No.33237 of 1990)

RUBBER, PLASTIC AND CABLE MAKING INDUSTRY (CONSOLIDATED) AWARD 1983(1)

(ODN C No. 01800 of 1982) Rubber, plastic and Rubber, plastic and cablemaking employees

JUSTICE MUNRO SYDNEY, 13 MAY 1991 Contract of employment: term of engagement DECISION"

1. In his decision Munro J commenced by noting that the Union and the employer:
   

"... have agreed that the Commission should arbitrate upon the merits of a claim by (the Union) for the reinstatement of four former employees of (the employer)." (Emphasis added.)

1. In the course of his reasoning Munro J noted that he accepted Mr Richardson's submissions that the terms of the 309 day agreement should be taken into account. His Honour said:
   

"It is not necessary for me to consider whether as a matter of law each contract of employment was extended to include the terms of such agreements. It is sufficient for the purposes of this case that the overaward agreement is regarded by both parties as so fundamental to the four employees' employment relationship that interpretation of it is necessary to resolve the issue about reinstatement."

After reviewing the evidence, his Honour said:

"In the circumstances I shall as an exercise of arbitral function determine an interpretation to be given to the guarantee. My method in exercising this arbitral function takes into account so much of the extrinsic evidence as I consider should be given weight in my determination." (Emphasis added.)

1. His Honour then proceeded to analyse the competing arguments and concluded that he should treat the guarantee of employment as meaning substantially what the employer argued. In essence this interpretation was that the undertaking not to terminate employment for five years applied only to termination "for reasons directly or indirectly consequential to the introduction of 12 hour shifts and the 309 day working system."

2. The written decision concludes:
   

"By the Commission:

Deputy President"

1. The copy in evidence did not bear a signature, but I infer the decision was published by the Commission with the authority of Munro J.
   The Employer's Case

2. Counsel for the employer analysed the pleadings which have been delivered and contended, correctly in my view, that they disclosed three issues: (i) Did the 309 day agreement and the employment guarantee form part of the contracts of employment between the employer and Messrs Kopty and Theodorelos? (ii) How is the employment guarantee to be interpreted? Is it a guarantee of employment for five years or, as Munro J thought, confined only to a guarantee against termination related to the introduction of the 309 day year? (iii) Were the terminations harsh, unjust and unreasonable?

3. Counsel argued that the Union had advanced a case in respect of each of those issues before Munro J. His Honour having reached a conclusion adverse to the applicants, it was said that they were estopped from relying on them in the present claim. Counsel contended there had been agreement between the parties that Munro J should decide the matters in dispute and "by necessary implication" it had been agreed that the parties were bound to accept his Honour's decision. Munro J, it was said, was acting as a private arbitrator in the common law sense. Doe d.Morris v Rosser (1802) 3 East 115, 102 ER 501 and Joint Committee of River Ribble v Croston Urban District Council (1897) 1 QB 251 at 255 were relied on, as was the statement in The Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 at 453 per Gibbs J:
   

"The doctrine of estoppel extends to the decision of any tribunal which has jurisdiction to decide finally a question arising between parties, even if it is not called a court, and its jurisdiction is derived from statute or from the submission of parties, and it only has temporary authority to decide a matter ad hoc:..."

Private and Industrial Arbitration Distinguished

1. The term "arbitration" in Australia may apply to one or other of two fundamentally different procedures.

2. Arbitration may connote the determination by an arbitrator of disputes submitted by agreement of the parties. This process is sometimes referred to as private arbitration and I shall use that term hereafter.

3. The arbitrator in a private arbitration derives jurisdiction and power from the agreement of the parties. In appearance and practical effect, the process is very like that of litigation. The arbitrator hears evidence and argument, finds facts and applies the law to those facts. In the course of so doing, the arbitrator will rule on disputed questions of law. The result is an award which conclusively establishes the rights of the parties as to the arbitrated dispute, unless and until set aside by a court. Thus an arbitrator may find that A breached his contract with B, and that by reason of that breach B suffered damage in the sum of $X, with the consequential award that B recovers $X against A. That award can be enforced through the courts.

4. Industrial arbitration, on the other hand, is a procedure under statute. In the Federal sphere the head of power is s.51 (xxxv) of the Constitution which confers power on the Commonwealth Parliament to legislate "with respect to conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State". Although often spoken of today as a uniquely Australian institution, industrial arbitration (and conciliation) appear to have originated with the United Kingdom Councils of Conciliation Act 1867; see the historical account in the judgment of Isaacs J in Australian Boot Trade Employees' Federation v Whybrow and Co (1910) 11 CLR 311 at 333 and also the judgment of his Honour when Chief Justice in Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319 at 354-362

5. It was recognised at an early stage in Australia that arbitration in an industrial setting, in contrast to private arbitration, necessarily involved a quite different process in terms of effect on the existing legal rights and obligations of the parties. If workers demand higher wages, and strike when their employer refuses to agree, an arbitrator acting in a private arbitration could do no more than make an award based on existing legal rights - in the example given, a finding that the workers had or had not breached their contracts of employment and an award of damages to the employer if they had. The one thing the private arbitrator could not do would be to award the workers more than their existing entitlement under their contracts - whether that be the full amount of their claim or some lesser amount exceeding that offered by the employer.

6. Thus in Whybrow at 332, Isaacs J observed:
   

"We are so accustomed to regard arbitration amid surroundings of ordinary legal procedure to enforce rights already existing that there is a real danger of attributing to it as innate characteristics what are in truth nothing more than usual accompaniments, owing their presence to the surroundings, and not to the elemental nature of arbitration itself."

1. In the same case Barton J (at 322) repeated his earlier comment in R v Commonwealth Court of Conciliation and Arbitration, ex parte Whybrow and Co (1910) 11 CLR 1 at 37:
   

"As the parties cannot agree, it is for this tribunal to make an agreement for them ..."

1. O'Connor J spoke in Whybrow (at 329) of the changing sense in which the term arbitration was used in the Constitution:
   

"At the time when the Constitution was passed the term 'arbitration' had expanded in meaning so as to include methods and principles of adjudication, differing in many respects from those connoted by the term as known to the common law. The tribunal was no longer necessarily constituted by act of the parties, nor for the adjustment of each dispute as it arose. It might be a permanent public tribunal, appointed by Government, for the arbitral adjustment of differences of a special kind. Parties between whom such differences existed were compelled to resort to it, and were bound by its awards. The legislation of Great Britain and of some Australian Colonies, and of New Zealand, in force before the passing of the Constitution, has been referred to by this Court, in several cases, to illustrate these changes in the meaning of the word, with relation to industrial disputes."

1. A major issue in the subsequent constitutional history of industrial arbitration in Australia was the working out of the relationship between the legislative power over conciliation and arbitration and the judicial power of the Commonwealth contained in Chapter 111 of the Constitution. Since private arbitration is, as has been noted, in practical respects very similar to the exercise of a judicial function by courts, it might be expected that judicial exposition of the distinction between industrial arbitration and the exercise of judicial power might also illuminate the difference in function between industrial and private arbitration. In Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 463 Isaacs and Rich JJ. said:
   

"That (i.e. conciliation and arbitration) is essentially different from the judicial power. Both of them rest for their ultimate validity and efficacy on the legislative power. Both presuppose a dispute, and a hearing or investigation, and a decision. But the essential difference is that the judicial power is concerned with the ascertainment, declaration and enforcement of the rights and liabilities of the parties as they exist, or are deemed to exist, at the moment the proceedings are instituted; whereas the function of the arbitral power in relation to industrial disputes is to ascertain and declare, but not enforce, what in the opinion of the arbitrator ought to be the respective rights and liabilities of the parties in relation to each other.

An industrial dispute is a claim by one of the disputants that existing relations should be altered, and by the other that the claim should not be conceded. It is therefore a claim for new rights. And the duty of the arbitrator is to determine whether the new rights ought to be conceded in whole or in part. His opinion may take any form the law provides; it may be called an order, or an award. But his declaration of opinion does not make it law. He does not legislate. It is always the Statute which gives the arbitrator's opinion efficacy, and stamps his decision with the character of a legal right or obligation."

1. Part of that passage was cited with approval by the Privy Council in The Boilermakers' Case (Attorney-General (Cth) v The Queen) (1957) 95 CLR 529 at 535 in the context of their Lordships' statement that:
   

"... the function of an industrial arbitrator is completely outside the realm of judicial power and is of a different order."

1. After citing the passage from Alexander, their Lordships go on to say, importantly for the present case (at 536):
   

"It is necessary throughout to bear in mind that the words 'arbitration' and 'arbitral functions' refer exclusively to the arbitration and arbitral functions for which the (Conciliation and Arbitration) Act provides. The same words in another context may mean something closely resembling a judicial process."

The Functions Exercised by Munro J

1. The Act contains no indication that members of the Commission are required or permitted, as part of their official function, to act as private arbitrators. Therefore if, as the employer alleges, the parties in fact agreed that Munro J was to act as a private arbitrator, his Honour would have had to be aware of that agreement and consent to so act. Presumably he would receive payment for his services and would carry out the work in his spare time. He would thus probably need the consent of the Minister to engage in paid employment outside the duties of his office: see s.25(1) of the Act. Since private arbitration and industrial arbitration under the Act are markedly different functions, in carrying out the former he would doubtless be at pains to make it clear that he was not carrying out the latter, which of course was his usual work.

2. The evidence however contains no hint that Munro J was asked to act in this dispute in the unusual role of private arbitrator, still less that he consented to so acting. Nor is there any suggestion that he was offered or received payment for his services, or that the consent of the Minister was sought under s.25(1).

3. Moreover, since notification of a dispute had been given under s.99 of the Act, Munro J had the statutory obligation under s.100 to deal with the dispute by conciliation or arbitration. This would be, to say the least, inconsistent with his Honour conducting at the same time a parallel private arbitration.

4. What his Honour in fact did seems only consistent with him exercising his industrial arbitration function under the Act. During ordinary working hours he received submissions from the parties (who addressed him as "Your Honour" and not "Mr Arbitrator"), conducted conferences, heard evidence and delivered a decision which on its face purports to be not the award of a private arbitrator but a decision of the Commission under his hand as a Deputy President. All of this was done with the complete acquiescence of the parties, including the employer, who at no time suggested to his Honour that he should have been acting like a private arbitrator.
   Agreement of the Parties

5. The evidence does not disclose any express agreement between the parties that Munro J would act as a private arbitrator and that they would be bound by his decision. In substance the employer relies on an implied term to that effect.

6. Such an implied term fails to meet a number of the BP Westernport conditions; see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26, cited in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347. In particular it was not necessary to give business efficacy to the agreement and was not so obvious that 'it goes without saying'.

7. Indeed I am inclined to think that there was no relevant agreement, in the sense of a contractual relationship, at all into which a term might be implied. The notification having been given under s.99 (in itself a matter of statutory obligation) the matter was before the Commission. It was open to the parties to take such jurisdictional points as they saw fit. As things happened, it suited both at the time not to take the point. This was not as a result of a bargain contracted by mutual promises ("We will agree not to object to jurisdiction if you do not") but rather two parties independently, for reasons which suited each one, taking a similar course. As I have already noted, when Munro J asked the parties in specific terms whether there was some agreement as to his having jurisdiction, neither party asserted that there was and neither party reproached the other for their conspicuous failure to answer his Honour's enquiry in the affirmative.

8. In any case, since consent cannot create jurisdiction (see Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163) there could be no binding contract to confer jurisdiction. The employer's argument implicitly accepts this, but contends that both parties must have known there was no jurisdiction in law and therefore there was an agreement to accept Munro J's decision in his capacity as private arbitrator.

9. I do not think this follows. From each side's point of view it was a rational course to proceed with the matter, leaving the jurisdictional point in abeyance, in the hope that the result of a hearing before an experienced Deputy President of the Commission might be acceptable to both sides. What happened is explicable without any imputed agreement to treat the proceeding as a private arbitration producing a binding result.

10. Nor is there any reason to conclude that whatever agreement was reached bound Mr Kopty and Mr Theodorelos. The Union advocate did not announce an appearance on their behalf or otherwise purport to bind them. They were present at the hearing but that is understandable since the subject matter must have been of great interest to them and they had no job to go to anyway.
    Estoppel under the Industrial Relations Act

11. If there was not a private arbitration, there can be no estoppel arising out of an industrial arbitration under the Act. This is clearly established by the decision of the Full Court in Australian Transport Officers' Federation v State Public Services Federation (1981) 50 FLR 438 at 444-447.
    Orders

12. The respondents' motion by notice dated 10 August 1992 is dismissed.